Stock of the day: Microsoft
18 September 2023
Today, we delve deep into the intricacies of Microsoft's chart movements, which garnered substantial attention last Friday due to signals that hinted at a potential sell-off, or at the very least, an impending one.
Beginning in mid-August, keen observers would have noticed Microsoft's price movement being encapsulated within a rising wedge pattern. For those unfamiliar, this pattern often indicates trend continuation, and in this context, it signaled the continuation of a downtrend that had its origins in mid-July.
The pivotal moment came last Friday when the stock price, in a decisive move, breached the lower confines of this formation. Such a breach is typically interpreted as a bearish signal, nudging traders towards a selling disposition.
However, it's essential to juxtapose this development with other significant levels on the chart. Enter the horizontal support, painted in an unmistakable blue, situated at the $330 mark. This level has historical precedence. From late June to early August, this line acted as a staunch supporter of prices until it was punctured, assuming the role of resistance. But as the tides of September rolled in, prices clambered back above this blue demarcation, reinstating its supportive stature.
The current scenario is a tug of war between these two technical developments. While the broken wedge nudges towards a sell, the blue line stands resilient, ensuring there isn't a precipitous fall. The decisive factor here would be the stock's ability, or lack thereof, to maintain itself above this blue realm. A conclusive day-end close beneath this zone would cement the bearish grip on the stock, with eyes then set on a long-term target stationed at the 61.8% Fibonacci level, which is highlighted in yellow on our charts.
In essence, while the sell signals are burgeoning, the blue line stands as the final bastion. A breach here could open the floodgates, steering the stock towards levels previously outlined by the Fibonacci retracement. Traders would do well to monitor these pivotal levels and adapt their strategies accordingly.